Decision from the Norwegian Labour Court - Salary conditions may continue to apply following the termination of a collective agreement

The Labour Court has recently issued a judgment clarifying that the fact that a company is replacing a collective agreement does not necessarily mean that salary supplements from the previous collective agreements automatically fall away (AR-2023-26). The judgement shows that the after-effects of collective agreements can be extensive.

The case relates to the nursing home Grefsenhjemmet, who was previously a member of the employer organisation Virke and at the time bound by the Agreement for Health and Social Services between Virke and NSF (Nw.: "Landsoverenskomsten for helse og sosiale tjenester"). Grefsenhjemmet was also bound by a collective agreement with a specific salary supplement called the stabilisation supplement. In 2014, Grefsenhjemmet terminated the membership in Virke, and became a member of NHO. The Nursing and Care Agreement (Nw.: "Pleie- og omsorgsoverenskomsten") was made applicable when Grefsenhjemmet became a member of NHO. The new collective agreement did not have a corresponding salary supplement. The dispute concerns whether the employees are still entitled to the stabilisation supplement, despite the Agreement for Health and Social Services no longer being applicable in Grefsenhjemmet. Other questions related to the case has previously been handled in both the Supreme Court and the Labour Court.

• The previous case for the Labour Court, clarified that the question of whether the employees are still entitled to stabilisation supplement was not resolved by the transitional negotiations in relation to the change of collective agreements (AR-2019-5).
• The Supreme Court concluded that the stabilisation supplement had become an individual salary condition and incorporated as part of the employees' employment agreements. The Supreme Court specified that it meant that the salary supplement did not fall away as a direct result of the former collective agreement no longer being in effect. There was also no basis for removing the salary supplement unilaterally on the basis of the employer's prerogative. Consequently, any change had to result from an agreement with the employee, from a collective agreement or a partial dismissal (HR-2021-1193-A).

The question for the Labour Court was whether the new collective agreement, the Nursing and Care Agreement, prevents that the salary and working conditions stemming from the previous collective agreement that has been incorporated as part of the employment agreements continue.

The Labour Court pointed out that the Nursing and Care Agreement sets out a comprehensive regulation of salaries and working conditions. However, this does not in itself prevent the continuation of the salary and working conditions in the employment agreements stemming from a previous collective agreement.

The Labour Court stated that it cannot be set an absolute rule that salaries and working conditions arising from previous collective agreements cease to apply when a new collective agreement is made applicable. This is particularly due to the fact that salary conditions are of a special character and constitutes a key element of the employment relationship. Unless the new collective agreement includes a clear prerequisite to change salary provisions in the employment agreements, there will be room to retain employment agreement terms that characterize, define and appear to be significant for the employment relationship. Consideration of the negotiation mechanism in the main agreement between NHO and LO Section 3-7 no. 6 when transitioning to a new collective agreement was also highlighted.

The question must therefore be assessed based on the relevant provisions of the employment agreement and their background, as well as the provisions and assumptions of the new collective agreement.

The Labour Court emphasized that the new collective agreement did not contain any direct, explicit and unambiguous regulation that overrides any provision of the employment agreements. The stabilisation supplement was of such a particular nature that the Labour Court did not find that the new collective agreement neither specifically nor generally provided a basis for disregarding it.

Consequently, the new collective agreement did not prevent that the salary conditions that had become a part of the employees' employment contracts continued.

We note that the topic of the after-effects of collective agreements, also may be relevant in other cases than when a company is changing employers’ organisations, for instance in case of transfer of business pursuant to the Working Environment Act Chapter 16. Companies should be aware of the risk of possible aftereffects of a collective agreement in the event of changing collective agreements.